TOKYO (REUTERS) -
Gold steadied above $1,040 per ounce on Tuesday as a rally in the dollar paused, soothing concern among investors who rushed to sell the precious metal the previous day on a jump in the greenback from a 14-month low versus the euro.
As of 0310 GMT, spot gold XAU= was up 0.4% at $1,041.60 an ounce from New York's notional close of $1,037.10.
Bullion hit a low of $1,036 earlier on Tuesday, its lowest price since Oct. 6, as it fell about 3 percent from a record high above $1,070 hit on Oct. 14.
Gold has rallied in the last two months as the dollar steadily weakened, making bullion cheaper for non-dollar holders and boosting investor interest in gold as a hedge.
"A drop by 3% from the record high is not surprising. It's a technical correction," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
U.S. gold futures for December delivery GCZ9 were almost flat at $1,042.40 an ounce after falling $13.60 or 1.3 percent to $1,042.80 on Monday.
In the currency market, the dollar held steady as investor selling of stretched higher-yielding currencies and the euro paused. [USD/]
"The market is watching the dollar," Leung said, referring to gold's resilience at around $1,040 per ounce.
He said bullion would soon test the $1,025-$1,030 level before making a decisive turnround.
An analyst at a Japanese trading company shared the view, saying a fall to that level could be achieved in coming days given the recent market trend showing that stocks fall ahead of U.S. monthly payrolls data at the beginning of each month.
While falls in stock markets usually boost gold's safe-haven appeal, they have recently preferred the dollar itself as a safer place to park their money.
"In the past two months, stocks peaked out and fell before the U.S. jobs data was out, regardless of whether the actual data were bullish or bearish," the analyst said. "That may happen again given uncertainty hanging over the global economy. It's an event risk we should be prepared for," he said.
Another drag might come from a sell-off in silver, which started its ascent before gold, buoyed by expectations that a global economic recovery would boost demand from industrial users, traders said.
Speculative positions in U.S. gold and silver futures both eased from peaks but stayed at high levels.
Underlining the weakening mood, data confirmed a further outflow of money from the world's largest gold-backed exchange-traded fund.
The SPDR Gold Trust (GLD) said its holdings fell 1.22 tonnes on Monday to 1,106.874 tonnes, down about 3 tonnes from the recent high earlier this month. [GOL/SPDR]
